What should parents do with $ from sale of house?

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invester123
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What should parents do with $ from sale of house?

Post by invester123 »

Parents in 60s and 50s. Maybe 15 years away or so from retirement. Background info: 2 properties, 1 primary and 2nd vacation home. Just made around $400k, >75% profit selling their vacation spot. In process of moving out of state and are trying to sell the first house but not looking to buy a new one just yet - just rent for now in the current market. General advice on what someone of their age should do with this sudden influx of cash. I only ask because they've got an average joe managing their stock portfolio from one of the banks. I believe he's been able to match the market, at least in 2021. Previous guy from another institution screwed up (in 2021) and somehow severely underperformed the market.

Was seeking general advice on what to do with this cash. One idea they had was to put 200k in a CD and perhaps the rest in the market and let their bank guy deal with it but they're not very financially savvy. Any advice would be much appreciated. I'm much younger and of the VTSAX n chill mindset and am trying to figure out how to help them.

Retirements maxed, backdoor roth, no debt, just mortgage for first house.
make_a_better_world
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Re: What should parents do with $ from sale of house?

Post by make_a_better_world »

I would invest it with the traditional principles of BH for asset allocation appropriate for age except I would DCA over 24 months instead of lump sum to reduce risk. This is based on my perception of the probability of recession.
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retired@50
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Re: What should parents do with $ from sale of house?

Post by retired@50 »

My advice for them:
1. Don't hand the money to a "guy" or an "average joe".
2. Get a library card.
3. Do some reading.
https://www.bogleheads.org/wiki/Managing_a_windfall
https://www.bogleheads.org/wiki/Book_re ... nd_reviews

A 3-fund portfolio isn't rocket science.

My advice for you:
1. Tread carefully.
2. Let it be their idea about how to invest this money.

If your parents are anything like me, they probably already like to read.

Regards,
This is one person's opinion. Nothing more.
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Taylor Larimore
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Re: What should parents do with $ from sale of house?

Post by Taylor Larimore »

invester123 wrote: Fri May 13, 2022 6:45 pm Parents in 60s and 50s. Maybe 15 years away or so from retirement. Background info: 2 properties, 1 primary and 2nd vacation home. Just made around $400k, >75% profit selling their vacation spot. In process of moving out of state and are trying to sell the first house but not looking to buy a new one just yet - just rent for now in the current market. General advice on what someone of their age should do with this sudden influx of cash. I only ask because they've got an average joe managing their stock portfolio from one of the banks. I believe he's been able to match the market, at least in 2021. Previous guy from another institution screwed up (in 2021) and somehow severely underperformed the market.

Was seeking general advice on what to do with this cash. One idea they had was to put 200k in a CD and perhaps the rest in the market and let their bank guy deal with it but they're not very financially savvy. Any advice would be much appreciated. I'm much younger and of the VTSAX n chill mindset and am trying to figure out how to help them.

Retirements maxed, backdoor roth, no debt, just mortgage for first house.
Investor123:

Suggest your parents consider the many benefits of The Three-Fund Portfolio.

Best wishes
Taylor
Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan." -- "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
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Watty
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Re: What should parents do with $ from sale of house?

Post by Watty »

invester123 wrote: Fri May 13, 2022 6:45 pm Retirements maxed, backdoor roth, no debt, just mortgage for first house.
What are the details on the mortgage? Is that on the other house that they going to be selling, and if so is it expected to sell soon?

It might make sense to pay off the mortgage but without knowing more about the rest of their finances and what they plan on using the money for it is impossible to give good suggestions about what they should do with the money.
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Sandtrap
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Re: What should parents do with $ from sale of house?

Post by Sandtrap »

invester123 wrote: Fri May 13, 2022 6:45 pm Parents in 60s and 50s. Maybe 15 years away or so from retirement. Background info: 2 properties, 1 primary and 2nd vacation home. Just made around $400k, >75% profit selling their vacation spot. In process of moving out of state and are trying to sell the first house but not looking to buy a new one just yet - just rent for now in the current market. General advice on what someone of their age should do with this sudden influx of cash

. I only ask because they've got an average joe managing their stock portfolio from one of the banks. I believe he's been able to match the market, at least in 2021. Previous guy from another institution screwed up (in 2021) and somehow severely underperformed the market.

Was seeking general advice on what to do with this cash. One idea they had was to put 200k in a CD and perhaps the rest in the market and let their bank guy deal with it but they're not very financially savvy. Any advice would be much appreciated. I'm much younger and of the VTSAX n chill mindset and am trying to figure out how to help them.

Retirements maxed, backdoor roth, no debt, just mortgage for first house.
Some options and paths toward a sound long term "low cost" financial strategy.

1. Consider removing "Financial Advisor sales people", "wealth manager salespeople", "Bank financial consultant sales people", and "financial institution sales people", etc.
a) Contact Vanguard VPAS services and just get some input on using their services at low cost, discontinue after setup optional, etc.
b) Using a "fee only fiduciary financial advisor that is well recommended. They are not numerous.
c) etc.

2. Before doing #1, learn. Find out what all of your options are:

Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212

**Consider "editing your original post using the pencil icon to include the "portfolio review information" so that forum portfolio review seniors can help suggest various "comprehensive plan and structures and paths" that might work much better than what exists now.

*** Without additional data, it's tough to give comprehensive constructive suggestions that are accurate.

Read, absorb, learn, etc:

Bogle Philosophy
https://www.bogleheads.org/wiki/Bogleh ... hilosophy
Here are links to the wiki's "Getting Started" and "Investing Startup Kit" pages:
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Bogleh ... rt-up_kit
Define General Investment Goals and Objectives (what is your plan?)
https://www.bogleheads.org/wiki/Invest ... statement

3. Read:
MANAGING A WINDFALL
https://www.bogleheads.org/wiki/Managing_a_windfall

I hope this is helpful.
j :D
Wiki Bogleheads Wiki: Everything You Need to Know
delamer
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Re: What should parents do with $ from sale of house?

Post by delamer »

Have they they taken into account any income taxes that may be due on the sale, in terms of what they’ll hsve to invest (net)?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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arcticpineapplecorp.
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Re: What should parents do with $ from sale of house?

Post by arcticpineapplecorp. »

make sure they pay their quarterly estimated taxes due to the capital gains taxes that will be owed (unless they like paying penalties on underpayment of estimated taxes) unless their "average joe managing their stock portfolio from one of the banks" has already done some major tax loss harvesting this year. There have been opportunities as of late. Has he?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
hudson
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Re: What should parents do with $ from sale of house?

Post by hudson »

invester123,

Thoughts of the "bank guy" give me heartburn.

Thoughts of my children advising me what to do with my money give me heartburn.
If they did attempt to coach me, I'd thank them very much for their advice, then ignore it.

What would I do with a windfall?
Highest quality fixed income duration matched to my investment horizon. That may or may not fit your parents' asset allocation.
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Re: What should parents do with $ from sale of house?

Post by abuss368 »

invester123 wrote: Fri May 13, 2022 6:45 pm Parents in 60s and 50s. Maybe 15 years away or so from retirement. Background info: 2 properties, 1 primary and 2nd vacation home. Just made around $400k, >75% profit selling their vacation spot. In process of moving out of state and are trying to sell the first house but not looking to buy a new one just yet - just rent for now in the current market. General advice on what someone of their age should do with this sudden influx of cash. I only ask because they've got an average joe managing their stock portfolio from one of the banks. I believe he's been able to match the market, at least in 2021. Previous guy from another institution screwed up (in 2021) and somehow severely underperformed the market.

Was seeking general advice on what to do with this cash. One idea they had was to put 200k in a CD and perhaps the rest in the market and let their bank guy deal with it but they're not very financially savvy. Any advice would be much appreciated. I'm much younger and of the VTSAX n chill mindset and am trying to figure out how to help them.

Retirements maxed, backdoor roth, no debt, just mortgage for first house.
Hi invester123 -

If your parents are not comfortable or capable of managing their investment portfolio (or simply have no desire), I would consider contacting Vanguard PAS. They offer a low cost solution and provide a lot of value.

I have family who engaged Vanguard PAS and could not be happier.

If interested, here is additional information:

https://investor.vanguard.com/advice/fi ... lsrc=3p.ds

Brest.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
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abuss368
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Re: What should parents do with $ from sale of house?

Post by abuss368 »

invester123 wrote: Fri May 13, 2022 6:45 pm Parents in 60s and 50s. Maybe 15 years away or so from retirement. Background info: 2 properties, 1 primary and 2nd vacation home. Just made around $400k, >75% profit selling their vacation spot. In process of moving out of state and are trying to sell the first house but not looking to buy a new one just yet - just rent for now in the current market. General advice on what someone of their age should do with this sudden influx of cash. I only ask because they've got an average joe managing their stock portfolio from one of the banks. I believe he's been able to match the market, at least in 2021. Previous guy from another institution screwed up (in 2021) and somehow severely underperformed the market.

Was seeking general advice on what to do with this cash. One idea they had was to put 200k in a CD and perhaps the rest in the market and let their bank guy deal with it but they're not very financially savvy. Any advice would be much appreciated. I'm much younger and of the VTSAX n chill mindset and am trying to figure out how to help them.

Retirements maxed, backdoor roth, no debt, just mortgage for first house.
One other recommendation is that I would consider meeting with a qualified CPA to plan for this years estimated taxes. The estimated gain will be taxed as both ordinary gain (recapture of depreciation) and capital gains.

Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: What should parents do with $ from sale of house?

Post by Golf maniac »

When will they need the money to buy a new home and how much will they need to purchase? This is the basic question that needs to be answered. If money needed for home in the next few years that money should be in a shorter term vehicle such as a CD, high yield savings, or short term bond fund. The remainder can be invested in the market based on their risk tolerance. I agree that using the Vanguard PAS advisor is a solid option.
CaptainT
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Re: What should parents do with $ from sale of house?

Post by CaptainT »

At 60 your parents are likely not 15 years from retirement.
That you say this shows you likely don't have the full fiscal picture.
It isn't your issue. Say to whichever seems more into internet "I found this great fiscal site bogleheads.org you might check it out"
Then mind your own fiscal situation.
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